Characterizing Pareto Improvements in an Interdependent Demand System

Interdependent preferences generally imply Pareto inefficiency. For a general demand system, we provide a characterization of Pareto improvements. For a prominent parametric specification, the Linear Expenditure System, we characterize in detail the welfare loss associated with interdependent preferences. Using an estimated empirical model of this kind, we calculate the compensating variation corresponding to the welfare loss. Copyright 2004 Blackwell Publishing Inc..

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Year of publication:	2004
Authors:	Kooreman, Peter ; Schoonbeek, Lambert
Published in:	Journal of Public Economic Theory. - Association for Public Economic Theory - APET, ISSN 1097-3923. - Vol. 6.2004, 3, p. 427-443
Publisher:	Association for Public Economic Theory - APET

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005663109